Baca-Pogorzelska: Polish energy sector needs billions

“If we add up all plans of energy companies for the coming years, we will come up with infinity. Or at least with amounts that will give us a headache,” writes Karolina Baca-Pogorzelska from the Dziennik Gazeta Prawna daily.

We are no longer talking about dozens, but hundreds of billions of Polish zlotys – this is how much the Polish energy sector needs to spend in the coming years. This pertains to both the modernization of old installations, as well as construction of new units, mostly coal-fired and combined gas and steam power plants. But that’s not it. By 2021 the sector needs to adhere to the so-called BAT Conclusions and to the Industrial Emissions Directive. Power plants need to emit less compounds of sulphur, nitrogen, mercury and chlorine. This means the sector will need to spend about PLN 10 billion within the next 3 years.

Next in the Brusselian pipeline is the decision on the future of the EU Emissions Trading System for 2021-2030. Today we know one thing – the amount of free CO2 emissions allowances will go down and they will be more expensive, because this is the only thing that will stimulate the development of unconventional energy sources, which don’t emit carbon dioxide. According to initial estimates, the energy sector is getting ready to spend PLN 13 billion annually, which is PLN 130 billion in a decade. It’s true that according to Eurelectric’s estimates the sector will be able to acquire half of the money from EU funds, but we are still talking about huge costs. If we add to this the potential plan to build a nuclear power plant which will cost PLN 50-60 billion, this is the cost if we are planning a 3000 MW capacity (decision has not been made yet) and construction of coal- and gas-fired power plants, and potentially one or two open pit brown coal mines, i.e. another PLN 100 bn., we will need to quickly find PLN 330 bn. This needs to happen if all the forecasts come true, if the EU law will be getting more strict and if our plans are to pan out. Naturally the PLN 330 billion will be spread over a decade, but still, the costs are exponential.

At the same time nobody doubts that the energy sector will transfer the costs to the consumer. Today the G-11 tariff for individual consumers is regulated by the Energy Regulatory Office, which means without the Office’s consent there will be no increase or its scale will not be the same as the sector would expect. Therefore, at least in theory the statistical Pole will pay less than everybody else. But that pertains to electricity. The consumers whose tariffs are unregulated may see increases, which in turn will impact the cost of, e.g. services.

The draft of the Act on the capacity market (i.e. a situation where we pay the power plants not only for energy production, but also for the readiness to increase output at peak times to avoid blackouts) may cause similar increases. About 25% of the costs will be transferred to households and over 50% to small- and medium-enterprises.

There is no doubt that electricity prices will go up in the nearest future. This also pertains to electricity generated from coal because new blocks need investments and secondly the raw material is getting more expensive. Poland is starting to run out of coal and prices in the Amsterdam – Rotterdam – Antwerp (ARA) ports are stunning. USD 82 for a ton (price from 27 July 2017) is impressive if we remember that last year the same raw material was half as expensive. The last time we saw an 8 at the beginning in ARA was at the turn of 2013 and 2014, which was a really long time ago.

We could rejoice if Poland exported coal because we would finally profit from it and a lot, because mines managed to significantly limit the extraction costs to PLN 250 per ton on average. The problem is though, we are running out of coal and instead of exporting it, we will have to import even more. And in the context of world coal prices this is not such good news.